Selectmen Review

Business Incentive Plan

By John Voket

The Newtown Economic Development Commission’s new Business Incentive Plan that was accepted for review by the Board of Selectmen last Monday proposes to provide modest, short-term tax abatements for companies that relocate and develop new facilities in town, or existing companies that expand or improve their facilities.

A new and different twist to similar proposals that were never fully implemented in town, is to provide some relief to companies that may have modest facilities but a significant inventory of taxable personal property, according to EDC Chairman Chet Hopper.

Mr Hopper said that even though the proposal has a new benefit element, the idea of providing incentives for local business development has been around for some time.

“These plans have really been offered since Colonial times,” Mr Hopper said.

He explained that in the cases of some neighboring towns, these plans designed to attract new additions to the commercial tax roles are formalized. Other towns have adopted more informal tactics.

“We don’t want people to get the idea we’re giving away the farm here,” Mr Hopper told the selectmen and others at the meeting. “We just want to level the playing field for companies that are considering a move to the region.”

Although a similar plan was proposed several years ago, it did not meet with the approval of all town boards so it was suspended, Mr Hopper said. But the latest incentive proposal utilized state guidelines to enhance it, modify it, and simplify it, he said.

The process by which any benefit is awarded has been modified, with the application first being received by the EDC or the town’s development director, Elizabeth Stocker. Once an application is qualified by Ms Stocker, it is passed on to the first selectman, and then to the Legislative Council. Additional meetings may be held between applicants and the first selectman, and the town attorney will also have an opportunity to review each application.

After some brief discussions Monday evening, it was further determined that any proposal should also be reviewed by the town Board of Finance. The multistep process was suggested to ensure maximum exposure, to ensure any beneficiary was not only qualified for the plan, but that applicants were proposing business development that was appropriate.

“We want to be sure any business coming into Newtown will enhance the town tax base, but the process will also ensure that the type of business or expansion proposed is the right fit for Newtown,” Mr Hopper explained.

First Selectman Herbert Rosenthal pointed out that state statute already permits the lead town official to enter into negotiations with business representatives concerning any tax benefits being extended for newly developed property, but extended thanks on behalf of the board for the EDC’s contributions to this latest proposal.

In an interview following the selectmen’s meeting, Mr Rosenthal indicated the plan would have to receive the blessing of the selectmen, the Legislative Council, and the Board of Finance to be implemented successfully.

“In theory, I support it,” Mr Rosenthal said. “Certainly the Economic Development Commission feels it’s important.”

Mr Rosenthal backed up comments he made during the meeting in respect to the typical points of criticism similar proposals have inspired.

“Some people dwell on the amount of taxes we are abating, but we’re not giving up taxes we already have,” he said. “In the case of qualifying companies, it will just take a little longer to get the money coming in.

“When you consider the program may entice a commercial developer to come to Newtown, you have to look at any abatement like we are getting three-quarters of the loaf instead of the whole loaf, but three-quarters are better than no loaf at all,” he said. “Optimistically, we have to see the glass as half-full.”

The proposal states the Business Incentive Program should encourage private investment, improve the physical appearance of the community, expand the local economic base, support strategic economic growth, and foster a healthy business climate.

Applicants may be eligible for benefits as long as they are not delinquent in taxes owed to the town, as long as the property involved is located in an approved commercial or industrial zone, and that proposed improvements are for the expansion of production and/or capacity of the business: retail, office, or manufacturing.

Proposed improvements must comply with all applicable state and local laws, and the applicant must provide appropriate estimates of the costs for said improvements. The town building inspector or assistant will verify that construction costs are properly stated in the building permit application.

Once an incentive agreement has been approved, work on the approved project must begin within 12 months, and shall be completed within 24 months, with any variations approved by the Board of Selectmen.

In the event any of the terms are disregarded by an applicant, the agreement including the fixing of assessments of personal properties shall be terminated, and the full amount of taxes will then be due and payable. If the applicant becomes delinquent during the agreement period, its benefits would be terminated and all taxes will become due and payable.

The range of benefits are equated to the dollar amount of proposed improvements ranging from a 20 percent maximum abatement for improvements of between $100,000 and $250,000, to 45 percent for improvements valued at more than $3 million. There are additional multipliers factored for taxable personal properties ranging from 1.10 percent for $50,000 to $100,000 in assessed property value to 1.25 percent for more than $500,000 in assessed personal property.

Mr Hopper said one time physical improvements wholly or partly subsidized by the town may include paving of driveways or parking areas, site preparation, street or road improvements including drainage, hookups to utilities, infrastructure engineering, or corrections of other physical problems.

“When you build a commercial building, you may get an abatement or have the town assist with site work,” he said.

According to Mr Hopper, any addition of commercial developments in town, even factoring incentives, helps offset the burden on residential taxpayers.

“Any development or improvement will apply an incremental benefit,” he said. “And if it is a new project coming to town, they are definitely benefiting the tax base. Residential taxes are not going to suffer as a result of the abatements given to qualified applicants. We’re not trying to give away the store here at the expense of noncommercial taxpayers.”